Just over a year ago, the standard valuation measure for a dotcom company was quite simple: think of a number and double it.

Although the bubble has burst, the markets seem no nearer to agreement on a rational way of valuing Internet companies. The term "Internet company" has ceased to be associated with instant riches and has turned into a standing joke - one car company now advertises its wares with the slogan: "Disappears faster than a dotcom company." The authors of Netvalue: Valuing Dotcom Companies, two management consultants, take a relatively upbeat view. NetPhase I, what they call the "feeding frenzy initial period", is over; NetPhase II, when dotcom companies "move beyond just trying to achieve minimum profitability to fulfilling the complete promise of the Net", has just begun.

Beleaguered dotcom investors and entrepreneurs will doubtless be eager to know how to qualify for the NetPhase II revival.

The authors see two potential sets of winners. The first group will contain companies with 40/ 40 critical mass - 40 per cent of the overall market for a product or service will be met through the Net and the company will have control of a 40 per cent market share in that Net segment.

The second group will contain independent business-to-business exchanges. The authors believe that the alternatives (joint ventures between industry leaders) have been short on specifics on how they will work. Investors should beware of "irrational pessimism" in the current climate. The Internet is not going to go away and still offers great potential advantages for the corporate sector - increasing the availability and speed of information, and cutting transaction costs.

However, it may take a considerable time before the lasting winners emerge. The early pioneers of the personal computer industry, for example, have long been overtaken by the likes of Dell and Gateway. According to the authors, 70 per cent of the pioneers will fail.

What has lost all credibility is the idea that the key to Internet success is to spend enormous sums of money on marketing and undercutting competitors in the hope of becoming the "first mover" that dominates your sector of the industry.

The authors of the book, Mr Peter Clark and Mr Stephen Neill, are highly critical of past Internet business plans, which they describe as "dark models" and "black holes". The former show initial promise but quickly turn into companies that show profitless growth as they indulge in price attrition against their competitors. The latter simply absorb cash that never subsequently escapes.

The reason why investors were so willing to give credence to such models was a combination of ignorance and greed. The Internet was so new that it was easy to construct "pie in the sky" models that assumed industries could be revolutionised overnight.

The greed was obvious - on the part of founders, who wanted to become dotcom millionaires like the people they had read about in Forbes magazine; on the part of venture capitalists, who brought companies to the stock market with no record of substance so that they could realise their stakes; and on the part of investment banks, which were happy both to earn hefty fees from those new issues and to publish analysts' valuations that owed more to wishful thinking than to detailed research.

But the main difficulty the authors face (an inevitable consequence of publishing timetables) is that the book was written in the middle of 2000. Both the stock market and the technology sector have moved a long way since then.

NetValue: Valuing Dotcom Companies Uncovering the Reality Behind the Hype, by Peter J Clark and Stephen Neill, published by Amacom, Price: $27.95